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I’ve discussed the Aussie dollar a few times on the blog in the past few months. It’s been declining for just about the entire year, down nearly 8% as of Friday. In my weekly piece for TraderPlanet I take look at three bullish signs for the currency.

Here’s a blurb:

While the waterfall hasn’t been turned off, there are some bullish notes that are beginning to develop on the chart and in the sentiment data for the Aussie Dollar. The drop in 2012 looks very familiar to the move we’ve been experiencing this year. Since price has fallen to last year’s low we are going to compare the similarities between the bottom in ’12 and where we currently sit.

$FXA has been in a strong down trend and is unlikely to flip directions overnight. Go read the rest to see the three signs that may be in the bulls favor.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

The Aussie Dollar ($FXA) has been experiencing some weakness with momentum turning bearish. However there are a few bright spots for the currency down under. In March I wrote about the bullish COT data for the Canadian dollar, British Pound, and the Australian Dollar. All three put in gains in the following weeks. $FXA is now seeing similar action it the latest COT data while still experiencing headwinds from the increase in selling.

Here’s a piece:

Over the last month the Aussie dollar ($FXA) has been experiencing some weakness, dropping 5% in April. Let’s take a look at some of the earning warning signs that lead to the drop as well where the Aussie dollar could be heading.

While the drop has been quick, there are some signs we can look at that foreshadowed the move and help us examine future charts of not only the Aussie but other securities as well. In early April the Currency Shares Australian Dollar ETF ($FXA) attempted to break above resistance set over the previous twelve months at $105.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

One of my favorite data sets is the Commitment of Traders figures that the CFTC released each week. It shows us how various types of traders are positioned within various futures markets such as corn, Treasury’s, copper, and multiple currencies. A growing theme recently has been selling of certain major foreign currencies by the Large Trader category, which is often made up of hedge funds.

When studying COT data I primarily look at the Commercial Traders (‘smart money’) and the Large Traders (large hedge funds and institutions). The Small Trader category can be useful when at extreme reads but most of the time it just sits near the zero line so we don’t glean very much from these odd-lot traders.

First up we have the Canadian dollar ($FXC). Since mid-2009 Large Traders haven’t spent much time net-short the loonie and typically when they are we have seen the loonie eventually bottom out. Currently we can see that the Commercial Traders are the most net-long they have been in three years while hedge funds and Small Traders are historically extremely net-short.

Second up is the British Pound ($FXB). Over the last few years it hasn’t been unusual to see Large Traders go back and forward between being net-long and short the Pound. What I find interesting is the magnitude that the Commercial Trades have taken a net-long position, almost to the previous high from mid-2011. Hedge funds are currently net short but not yet to the same degree as in 2011.

The Australian dollar ($FXA) is another market that we typically see Large Traders stay net-long. And as of last week they still were but are very close to flipping shorting. We looked at the uptrend in the Australian equities last week, although a shift in the Aussie dollar could create some headwinds for equity bulls.

So these are three currencies that Large Traders don’t seem to be big fans of right now. However, typically when this rubber band is expanded, in some cases to the current level, we see it relax/consolidate or snap back. This could have been created as part of the ‘risk on’ nature the market has adapted. This would make sense considering two of the currencies hedge funds have befriended are the Mexican Peso, the New Zealand Dollar, and the U.S. Dollar. Going forward, if we begin to see strength in the Aussie $, the Pound, or the Loonie we may see a short-squeeze that sends the Large Traders for the exits.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.